The Borrowing Power of Securities refers to the ability of a client to borrow funds from a financial institution, using the purchased securities as collateral for the loan.
A financial derivative that allows traders to speculate on the price movement of underlying assets without owning them.
A financial ratio illustrating the proportional relationship between a company's debt and its equity, reflecting its financial leverage and risk.
The Debt-to-Equity Ratio is a financial metric that indicates the relative proportion of shareholders' equity and debt used to finance a company's assets.
The debt/equity ratio is a financial metric that indicates the relative proportion of a company’s debt to its total equity. It demonstrates how leveraged a company is in terms of its debt financing compared to its equity financing.
Financial risk refers to the potential for volatility in investment performance due to the use of borrowed money. It indicates the possibility of losing money when investing in financial instruments.
Gearing refers to the relationship between funds provided to a company by ordinary shareholders and long-term funds with a fixed interest charge such as debentures and preference shares. High gearing implies higher fixed charges on debt, impacting investment risk and returns.
Leverage refers to the use of various financial instruments or borrowed capital—such as margin—to increase the potential return of an investment.
Negative leverage, also referred to as reverse leverage, occurs when the cost of borrowing exceeds the returns generated from investments. This situation creates a net loss for the investor, contrasting with positive leverage where borrowed funds generate higher returns.
The term 'On Margin' refers to the act of purchasing securities by paying only a fraction of their price and borrowing the rest from a broker or a financial institution. This practice allows investors to buy more securities than they could with their available funds, using leverage to amplify potential gains or losses.
A term frequently used on Wall Street to describe the use of borrowed funds by individuals or companies to increase the return on invested capital, as well as an acronym for the options pricing model.
Other People's Money (OPM) refers to the financial practices of leveraging borrowed funds or investment capital instead of using one's own resources to facilitate business activities and financial growth.
An investment strategy involving the use of borrowed funds to increase the return on an investment.
Releveraging refers to the process of increasing the level of debt in the capital structure of a business. This financial strategy is often used to enhance returns on equity by leveraging borrowed funds.
